25TH ANNIVERSARY OF CEEMAN
LEARNING FROM EACH OTHER: 1998-2002
PART I

SECTION 1
Political Stabilization
democracy was almost fully consolidated in nearly all CEE countries by 2002
In an article in Political Science Quarterly in 1984, political scientist Samuel P. Huntington wrote that the likelihood of democratic development in CEE was "virtually nil." Yet, with the disintegration of the Soviet Union and Yugoslavia, the collapse of state communism, and movement toward free markets, democracy was almost fully consolidated in nearly all CEE countries by 2002.

According to Professors Nina Bandelj (Slovenia) and Bogdan Radu (Romania), "the catalyst of the political transformation in this region was not 'natural' capitalist economic development…Rather, it was a political commitment of the elites to the creation of democratic institutions, and learning by citizenry how these institutions operate – both structured also by the external pressures integral to the European Union accession process – that was crucially important for the democratic consolidation in CEE."
CEEMAN'S WORLD 1998 - 2002
Undoubtedly, there were nationalist movements that facilitated democratization in some CEE nations (the consolidation of East and West Germany; the peaceful division of the Czech and Slovak republics) and ethno-nationalist conflicts that impeded it in other cases (Serbia, Bosnia and Herzegovina, Croatia, and Kosovo). A decisive factor toward democratic consolidation were the EU Association Agreements covering trade-related issues, political dialogue, legal harmonization and other areas of cooperation, involving industry, environment, transport and customs, signed by Poland and Hungary in 1991, Romania, Bulgaria, the Czech Republic and Slovakia in 1993, the Baltic States in 1995, and Slovenia in 1996.

Vladimir Putin was elected President of Russia in 2000 and the euro was introduced in 2002. That same year the first reference to the BRIC countries (Brazil, Russia, India and China) was reported.

Sixth CEEMAN Annual Conference, Riga, Latvia, 1998

SECTION 2
Economic Recovery
East-Central European states did succeed in building democratic market societies
In a 1991 article in Social Research, German Political Sociologist Claus Offe said nations in CEE faced a "triple threat" because building markets, democracy, and a social safety-net simultaneously and "from scratch" involved "mutually incompatible tasks." Yet according to Dorothee Bohle and Béla Greskovits, of the Central European University, Budapest, "The actual outcome of the transformation partly belied the initial skepticism…the East-Central European states did succeed in building democratic market societies even if these remained economically and politically fragile. The fact that these new regimes proved resilient when facing massive social and political dislocations gave more credibility to optimistic analysts ….who tended to assume a virtuous interplay in which free markets and free politics would mutually reinforce each other in a rather unproblematic way."

Of course, this interplay was not without its problems politically and on the economic front:

According to IMF data, real per capita GDP declined in most CEE countries from 1990-'94 (negative 3% annualized in Slovenia, 1-3% in the Visegrád countries of Hungary, Poland, the Czech Republic and Slovakia, and over 10% in the Baltic States) and inflation skyrocketed. But during 1995-'99, these economies were in recovery and GDP growth rates ranged from +2-6% annually in the Visegrád countries to +10% in the Baltic States. This upward trend (a J-curve) continued through the next few years and inflation steadily declined from 1995 onward. By 2002, private sector employment accounted on average for 60% of GDP across CEE. It was 80% or more in the Czech and Slovak Republics, Estonia, and Hungary.
>10%

GDP declined in CEE in 1990-'94 with more than 10% in certain countries
2% - 10%

CEE economies were in a recovery in 1995-'99 with 2% - 10% growth
60%

By 2002, private sector employment accounted on average for 60% of GDP across CEE.
Mass privatization seems to have had benefits and consequences. Rates of employment dropped throughout CEE from 1990-1996 but stabilized thereafter and had an uptick beginning in 1999-2000 (though they continued to drop in Poland). On the human front, health studies found an increase in stress levels and male mortality in countries that were on the fast track to economic reform. In turn, the majority of economic studies found that countries on a faster pace toward liberalization of their markets and privatization recorded higher growth and lower inflation. In political and academic circles there continued to be debates about the merits of the rapid versus gradual privatization pace (that continue to this day).

Russia's economy went through a slower makeover and faced higher inflation and slower growth throughout the 1990s and into the new century. Moreover, Russia was affected by a precipitous decline in demand for crude oil and nonferrous metals during the Asian financial crisis of 1997-'98. The inability of the Russian government to implement economic reforms led to erosion in investor confidence. Many fled the market by selling rubles and forced the Central Bank to spend its foreign reserves to defend Russia's currency. The Ruble Crisis (or Russian Flu) hit on August, 17, 1998 and resulted in the Russian government devaluing the ruble and defaulting on its debt.
With the increase in world oil prices in the next two years, and improvements in private enterprise performance, Russia bounced back quickly and by 2000 unemployment declined as enterprises added workers.
Still, its transition story is complicated by continued subsidization of energy and key raw materials in Russia, Ukraine, Uzbekistan, and elsewhere that distorts markets and by the extensive involvement of the nomenklatura (party hierarchy, managers, and bureaucrats) in lucrative entrepreneurial businesses.

Finally, there was some shifting in foreign direct investment (FDI) in CEE in this period. In the first years of privatization, many CEE countries favored vouchers or sales of assets to local investors or employees (with the exception of Hungary). However, beginning in 1997-'98, FDI increased both in the purchase of assets and new investments in plant, equipment, and sales offices.

Sixth CEEMAN Annual Conference, Riga, Latvia 1998

SECTION 3
CEE Managers and Performance
Three factors were cited as holding CEE countries back.
After a sluggish spell in the first half of the 1990s, productivity rose dramatically in many CEE countries from 1998 to 2002. Countries having a tradition of works-councils (Poland and Hungary), self-management (Slovenia), and brigade-groups (Bulgaria) showed strongest signs of increased labor productivity. Still, growth in employment throughout CEE lagged GDP growth and fully one-fifth of workers in CEE lived on less than $2 per day—the global poverty standard in this era.

Three factors were cited as holding CEE countries back. First, experts estimated that as of 2000, the CEE countries were still many years behind the West in development and use of information and telecommunication technology in industry and offices. This technology gap contributed to inefficiencies and to competitive disadvantages in international markets. Second, employee relations and human resource management systems in CEE were slow to modernize. Third, there remained a "skills gap" in management capability and training.
Investigating the skills gap
CEEMAN undertook a study of management training needs, co-sponsored by the European Training Foundation, in Bulgaria, Poland, Romania, Russia (Moscow and Ural Region), and Slovenia. The project team surveyed a total of 82 enterprises and 564 managers between July and December 1998. The project was expended in 2000/2001 to include Hungary, Latvia, Lithuania and Ukraine, so that it included in total 158 companies and 852 managers. The overall coordination of the study was led by Milenko Gudić and country reports covered an overview of the transition process and of the results achieved, the main challenges and strategic responses of firms, an assessment of management capabilities, experiences with training and lessons learned, planned and contemplated next steps, and recommendations for learning partners.

Hans Buss, IQA Committee member, Riga, 1998

SECTION4
East-West Management Scholarship
In the broader arena of management scholarship, studies and books about transition and management issues in CEE multiplied
Prior to 1997, the majority of scholarly volumes published in English were addressed to privatization and authored by Europeans, Americans, or CEE natives based in universities outside of the region. Edited volumes by Koźmiński, Puffer, and Refik Culpan and Brij Kumar's Transformation Management in Post-Communist Countries: Organizational Requirements for a Market Economy were exceptions in including research by indigenous CEE scholars and scholarly practitioners.

From 1997-2002, by comparison, there were more signs of "active partnerships" in East-West management scholarship and its focus was enlarged. To illustrate, Privatization in Central and Eastern Europe: Perspectives and Approaches, edited by Demetrius S. Iatridis and June Gary Hopps, included chapters on Estonia by Mait Miljan and Kuino Turk; the Czech Republic by Thomas D. Hopkins; the Baltics by Valdas Samonis; Poland by Jacek Klich; Romania by Ovidiu Nicolescu; Russia by Thomas E. Weisskopf; Slovenia by Kenneth Zapp; Bulgaria by Svetlana Alexandrova; and Croatia by Mate Babič.

The 2002 volume Small Firms and Entrepreneurship in Central and Eastern Europe, edited by Oliver Pfirrmann and Günter H. Walter opened new territory and also featured original research from Western European and CEE scholars. Expanding the horizon even more, Professors Mihaela Kelemen and Monika Kostera wrote Critical Management Research in Eastern Europe: Managing the Transition. Meanwhile, journal articles in the English language by both indigenous and transplanted CEE academicians increased in kind.

CEEMAN representatives at the Global Forum in Chicago: Irina Sennikova, Reti Shutina, Danica Purg

SECTION5
Management Students and Programs
"Real world, real learning"
The CEEMAN member schools also took the lead in reducing the skills gap by educating management students and conducting company programs throughout CEE. Here, too, there was a period of adjustment. As Danica remembers it: "I noticed during the early years at the school that students simply accepted lessons without question and with little reflection. It bothered me. I wanted to make things more interesting for them, particularly in a country that was going through political change. I wanted to prepare leaders for a better world that requires deeper thinking and questioning. I believed we needed to develop not only leadership skills, but also more critical thinking and creativity."

Professor James Ellert, a Canadian who made his way to IMEDE Lausanne in 1981 to head the MBA program, helped to launch an International Executive MBA program launched as IEDC in 1991. The pedagogy would be more than theoretical. "Real world, real learning" (an IMD slogan); students would participate in compulsory study groups; it would be a modular, multidisciplinary program; and the centerpiece would be a consulting project." These ideas were drawn from the "best of the West" in management education.

He describes some of his experiences: "Students were unfamiliar with financial methods like income statements, balance sheets, the financial markets." Accordingly, time was devoted to covering the basics. In addition, the language and business terms were unfamiliar. "Sometimes we would have to wait for an English concept to be translated into German then Slovene and finally to other local languages." Nonetheless, he found that students "gradually got in the swing of it."
it was considered "rude" to challenge a professor
Still, this approach to teaching-and-learning was dismaying for IEDC management students in the early 1990s. "Many were reticent to get involved in the classroom," Jim recalled, where it was considered "rude" to challenge a professor. "They were more comfortable talking in groups." Initially, he adapted the pedagogy to let students discuss the case among peers before it was openly examined by the entire class. Later on, he reports, the challenge was to get animated MBA students to "wait their turn" in the classroom discussions.

Arnold Walravens recalls that many of the managerial students from the newly independent Slovenia and its sister states equated the free market with a caricature of American-style capitalism: "No taxes, no regulation, no rules, just free, free, free." Some had developed "bad business habits" from the old regime, involving bribery, political favoritism, and corruption. Their philosophy concerning the free market model was "If it's not against the law, what's the problem?" This is what Arnold says about the time that he began teaching corporate governance at IEDC, "I was confronted with complete misunderstanding of the concept." But through the combination of self-reflection and lively case discussions of ethical dilemmas in management, "understandings gradually shifted."

Professor Krzysztof Obłoj from Poland also saw students and managers evolve over the years. On the diversity of the student body, he says, "There can be 18 different nationalities in a room, different cultures, styles, orientations." He also finds CEE students to be "natural" entrepreneurs: "Students and managers from this region are always prepared to 'break the rules' or at least 'bend the rules.'" From decades of operating in a state-run system, "they know how to 'beat the system.'" The challenge for CEEMAN in this period would be to transfer knowledge about how to best educate current and future managers to the hundreds of new faculty joining schools and progressing in their careers in the region.

In 2000 CEEMAN got a new home in Bled

SECTION 6
Global Developments
mass privatization and "cowboy capitalism"
Developments around the world connect, in symbolic ways, to these trends in politics, economics, and management scholarship and education in CEE. As a harbinger of things to come, Margaret Thatcher, as Prime Minister of the United Kingdom, had launched mass privatization in that country in the mid-to-late 1980s when the government sold off water, gas, and electricity utilities, plus Jaguar, British Telecom, British Aerospace, British Petroleum, Rolls Royce, and British Airways. Public protest accompanied every move. Also during the '80s an epoch of "cowboy capitalism" was launched in the United States as President Ronald Reagan fired federal air traffic controllers for striking, reduced welfare subsidies, and lent support to the growing shareholder's rights movement that increased corporate profits but also led to massive corporate restructuring and job loss, as well as asset stripping and profiteering.

During the 1990s, as CEE began Thatcher-like privatizing and adopted its own version of "cowboy time" (an expression used by Madis Habakuk), the West took a corrective turn. Bill Clinton became the US President and Tony Blair the PM of England, moving their nations to a more centrist course. The years 1998-2002 also saw the launch of the euro , massive protests in Seattle against the globalizing agenda of the World Trade Organization, the founding of the Internet search company Google, and the bursting of the dot-com bubble in financial markets.

Samuel P. Huntington proved closer to the mark on political change with his analysis of conflicts between Muslims and the West in The Clash of Civilizations and the Remaking of World Order. Planes hijacked by Islamist terrorists took out the World Trade Towers in New York on September 11, 2001.
As for management development, a 1998 report by the European Training Foundation's Torino Group noted that traditional management schools "are now in competition with executive development centres, training companies, management consulting firms, independent consultants (supplemented by business school faculty working privately), in-company training centres and corporate universities." In August, 2002, the Management Education Task Force of the AACSB International Board of Directors issued a report "Management Education at Risk." Among the concerns cited was a lag in the use of information technology, a shortage of Ph.D. level professors, and the lack of "relevance" in the management and business curriculum.

On this point, the best-selling management book of this era was Good to Great: Why Some Companies Make the Leap…and Others Don't by Jim Collins, a world-class teacher who failed to earn tenure at Stanford Business School for lack of scholarly publications.

Managing Business Schools Seminar, Bled, 2000

Credits
Text — adapted from the book "CEEMAN - 20 Years of Creating History" by Philip H. Mirvis and Arnold Walravens, 2013

Production and Design — Artyom Ushnichkov, 2018